SK Discovery : chemicals Publishes '2023 TCFD Report'

- June announcement: Foundation established for 'IFRS S2' global climate-related disclosures

- Enhances integrated risk management and financial impact analysis centered on the board of directors

Amid the global increase in demand for financial disclosures related to sustainability, SK chemicals announced on the 1st that it has published the '2023 TCFD Report', which includes strategies for responding to various climate change scenarios.

This report supplements climate change response strategies in the four areas of governance, strategy, risk management, and metrics and targets and details scenario-based financial impact analysis based on the Task Force on Climate-related Financial Disclosures (TCFD) framework to comply with the climate disclosure standard 'IFRS S2' recently confirmed by the International Sustainability Standards Board (ISSB).

According to the report, SK chemicals established a climate change response governance structure centered on the board of directors by setting up a 'Risk Management Committee' last year. The Risk Management Committee reviews important ESG matters in overall management, including response to climate change, identifies risks associated with the business, and strives for systematic risk management by establishing strategies for each risk factor.

In addition, to respond to climate change risks, the company has realized three strategies: 'Achieving Net Zero across all business sites', 'Building a circular economy', and 'Transitioning the portfolio to a green materials business'.

To achieve Net Zero, SK chemicals plans to reduce 100% (including offsets) of greenhouse gases (Scope 1&2) directly and indirectly produced at its business sites by 2040 through production process efficiency, renewable energy distribution across all business sites, and transition to eco-friendly fuels such as LNG and hydrogen.

Another point to note in this report is the specific goals and methods for reducing Scope 3 greenhouse gases (greenhouse gas emissions throughout the entire value chain), where carbon emissions are difficult to measure, presented from last year.

SK chemicals plans to reduce greenhouse gases (Scope 3) generated in the value chain by up to 96% compared to the 2021 Greenhouse Gas Emissions BAU (Business as Usual) by 2050 through the 'establishment of a circular economy ecosystem' based on the circular recycling business system. The company aims to increase the use of recycled raw materials in line with the circular recycling business and increase the recycling rate of discarded plastics to reduce greenhouse gases.

Especially, the financial impact analysis based on climate change scenarios disclosed in this report is expected to attract the attention of many domestic and foreign investors.

SK chemicals analyzed and disclosed carbon cost risks based on three scenarios of a 1.5℃, less than 2℃, and over 3℃ global temperature rise in line with the Paris Agreement. It was predicted that investments for achieving Net Zero by 2040 in all three scenarios would have a positive financial impact in the long term. The report also includes analysis of the financial impact of potential risks assuming four scenarios of physical damage caused by climate change.

Ahn Jae-hyun, the CEO of SK chemicals, emphasized, "We are continuously promoting efforts and investments in 'Eco Transition' to solve the climate crisis issue with a sense of responsibility," and added, "We plan to continue active communication with stakeholders about the performance of our climate response strategy tasks in the future."

# Photo Description : Cover of SK chemicals Climate Change Response Report.

Scope 1 : Carbon emissions directly generated from resources owned and managed by the company (boilers, vehicles, etc.)

Scope 2 : Carbon emissions indirectly emitted through consumption of electricity, steam, cooling, etc., purchased by the company

Scope 3 : All carbon emissions generated from the entire value chain of the company, including the purchase of raw materials, distribution of products, usage, etc.

IFRS S1 : General Requirement for Disclosure of Sustainability-related Financial Information. A disclosure about sustainability-related risks and opportunities that can be considered when investors make investment decisions

IFRS S2 : Climate-related Disclosure. Disclosure about significant risks and opportunities related to climate, which must reveal information about the 'physical risks' induced by climate change and the 'transition risks' resulting from governmental regulations for low-carbon transition or changes in consumer preferences

Greenhouse Gas Emissions BAU (Business as Usual) : The amount of greenhouse gases that would be emitted if no efforts were made by governments, companies, etc., to reduce greenhouse gases

Circular Recycle : SK chemicals 'chemical recycling' technology that enables infinite reuse by breaking down waste plastic at a molecular level and remanufacturing it into raw materials. Compared to the 'mechanical recycling' method that cleans or cuts waste plastic into smaller sizes (flake form) for reuse, it can maintain high-quality properties and safety